Draw a graph with Coke on the vertical axis and Pepsi on the horizontal axis. Plot an initial budget line and indifference curve for a consumer. Scenario: the price of Coke goes down. Show what happens to the budget line and draw the new indifference curve. Decompose the full effect of the change in Coke consumed into a substitution effect and an income effect.

Draw a graph with Coke on the vertical axis and Pepsi on the horizontal axis. Plot an initial budget line and indifference curve for a consumer. Scenario: the price of Coke goes down. Show what happens to the budget line and draw the new indifference curve. Decompose the full effect of the change in Coke consumed into a substitution effect and an income effect.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 21SQ

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Question

Draw a graph with Coke on the vertical axis and Pepsi on the horizontal axis.
Plot an initial budget line and indifference curve for a consumer.
Scenario: the price of Coke goes down.
Show what happens to the budget line and draw the new indifference curve.
Decompose the full effect of the change in Coke consumed into a substitution effect and an income effect.

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